In a move that is expected to lead to lower rates for housing EMIs, car loans and corporate borrowing, the Reserve Bank reduced the short term lending rate (repo rate) by 0.25 per cent to 6-year low of 6.25 per cent in the fourth bi-monthly monetary policy statement.

"Industry was looking forward for this for a long time. It is a welcome step for the entire auto industry," Maruti Suzuki India Chairman RC Bhargava told.

"It is a welcome festival gift by RBI and the customers will appreciate it as it will support their buying. It will help create an overall multiplier effect across all segments and geographies," he added.

Echoing similar sentiments, Honda Cars India Ltd Senior Vice President Marketing & Sales Jnaneswar Sen said the move will help in improving the sentiment further.

"It is a positive step that will improve the sentiment," said, however, adding "the real impact of this rate cut will be visible when the commercial banks pass on the benefit by lowering the car loans".

SIAM Deputy Director General Sugato Sen hoped that banks would extend the benefit to the retail customers.

"It is a welcome step from all aspects. The RBI governor has begun on a positive note. The move will help the industry if the banks also pass on the benefit to customers. It will help in lifting the positive sentiment further during the festive season," he said.

The cut, first in six months, came amidst big clamour for easing rates especially after the departure of former Governor Raghuram Rajan, who was often accused of stifling growth by keeping rates too high.

The 6-member Monetary Policy Committee, headed by new RBI Governor Urjit Patel, reduced repo rate or the short term rate at which central bank lends to banks, to 6.25 per cent. Consequently, the reverse repo rate has also come down by a similar percentage point to 5.75 per cent.